By Andy Bruce and William Schomberg
LONDON (Reuters) – British industrial output grew at the fastest pace in nearly four years in April, though economists said the surprise surge did not look like a return to stronger economic growth before the country’s EU referendum.
Industrial output rose 2.0 percent in April after a 0.3 percent rise in March, the biggest month-on-month increase since July 2012, official data showed. That was far stronger than even the highest forecast in a Reuters poll of economists.
Bank of England policymakers are likely to take the data with a pinch of salt, having warned that economic figures are likely to be volatile and tricky to interpret before the June 23 referendum on Britain’s European Union membership.
A recent overall slowdown in the economy is largely due to uncertainty about the outcome of the vote, according to the overwhelming majority of analysts in a Reuters poll published on Tuesday. [ECILT/GB]
Organisations ranging from the BoE to the International Monetary Fund have warned of a shock to the economy if British voters opt to leave the EU.
The Office for National Statistics said manufacturing output also rose at the fastest pace since July 2012, up 2.3 percent on the month following a 0.1 percent increase in March.
“Despite the upbeat tone of the … figures, it is far too soon to proclaim that the sector is out of the woods, or shrugging off Brexit uncertainty,” said Paul Hollingsworth, economist at Capital Economics.
The data, which sent sterling to a session high, were boosted by the biggest monthly rise in the often volatile pharmaceuticals sector since February 2014, as well as a surge in electricity and gas production in an unusually cold April.
Economists were doubtful that the figures heralded a return to solid growth.
“Our central expectation is that April’s spike corrects in May with a sharp fall, which would still mean that for Q2 as a whole, manufacturing production growth is slightly negative,” BNP Paribas economist Dominic Bryant said.
Manufacturing association EEF said the figures were in line with its view that the sector – which failed to contribute to economic growth in 2015 – is slowly turning a corner.
Manufacturing represents around 10 percent of British economic output and the sector remains 6.4 percent below its pre-crisis peak.
Looking at the three months to April, which gives a better sense of the underlying trend in what is often volatile data, industrial output rose 0.7 percent, the first increase this year.
Britain’s overall economy slowed in the first quarter, with the pace of growth easing to 0.4 percent compared with 0.6 percent in the previous three months.
Things could get worse in the current quarter. A series of surveys of businesses from Markit/CIPS published last week suggested growth was on course to slow to just 0.2 percent in the April-June period.
They also suggested some companies have put contracts on hold ahead of the referendum.
(Editing by Andrew Heavens)